Effect of various transactions on the statements of cash flows Exhibit 5.16 shows a simplified statement of

Question:

Effect of various transactions on the statements of cash flows Exhibit 5.16 shows a simplified statement of cash flows for a period. Numbers appear on 11 of the lines in the statement. Other lines are various subtotals and grand totals; ignore these in the remainder of the problem. Assume that the accounting cycle is complete for the period and that the firm has prepared all of the financial statements. It then discovers that it has overlooked a transaction. It records that transaction in the accounts and corrects all of the financial statements. For each of the following transactions, indicate which of the numbered tines of the statement of cash flows change, and state the amount and direction of the change. If net income, tine (3), changes, be sure to indicate whether it decreases or increases.

Ignore income tax effects.

a. Amortization of a patent, treated as an expense, $600.

b. Acquisition of a factory site financed by issuing capital stock with a market value of $50,000 in exchange.

c. Purchase of inventory on account for $7,500; assume inventory had increased for the year before the firm recorded this overlooked transaction.

d. Purchase of inventory for cash of $6,000; assume inventory had increased for the year before the firm recorded this overlooked transaction.

e. Uninsured fire loss of merchandise inventory totaling $1,500; assume inventory had increased for the year before the firm recorded this overlooked transaction.

f. Collection of an account receivable totaling $1,450; assume accounts receivable had increased for the year before the firm recorded this overlooked transaction.

g. Issue of bonds for $10,000 cash.

h. Disposal of equipment for cash at its carrying value of$4,500.

Simplified Statoment of Cash Flows (Problem 5.5 for Self-Study) EXHIBIT 5.16 Operations Cash Receipts from Customers Les

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...